Business & the environment
‘It is hard to be green when you’re in the red’ is often posed as a truism. It implies a business’ response to environmental matters is discretionary and of low priority relative to other activities.
Neither is prudent in these times as the Minster of Agriculture made very clear at the launch of DairyNZ’s strategy this month when he said “Environmental sustainability is the industry’s biggest challenge, especially in water use and quality .. to ignore it is not an option... Don’t see it as a compliance issue but as an integral part of your future business success.” Another valid perspective is that if the costs of poor environmental performance are externalised to others, such as rate and tax payers, then the business’ financial reporting is not reflecting the firm’s true economic contribution or its relative competitiveness. Fortunately, there are plenty of good examples of businesses – often sector leaders – who show it is possible to be profitable and environmentally responsible. Take, for example, Auckland-based printing firm Soar Printing, a member of the Enviro-Mark programme, who have significantly improved their environmental performance and in doing so are making savings of $150,000 a year.
Commitment at the governance and executive level is a stand-out feature of such firms. The expectations of their leaders are not driven by a ‘green zealotry’ but rather a very clear appreciation of the strategic imperative that they must adjust their business settings if they are to remain competitive in the long term. They appreciate too that the transition to a business model with a lower environmental footprint will often take several years. Thus, in addition to capital investment in low emission technology, an organisation needs to change its culture (values and behaviours) to align with achieving this outcome.
Some think the global financial crisis has deferred environmental concerns. However, the underlying drivers for improved environmental performance remain very strong: energy security and supply; limits to critical natural resources, especially water; the increasing cost of waste; control of air pollution and reducing greenhouse gas emissions (climate change); to name a few. These drivers are reflected in strengthening customer demand for products and services with verified environmental credentials and by a higher public expectation that businesses visibly exercise corporate social responsibility (CSR). Younger employees especially are differentiating who they choose to work for on the basis of a company’s values, notably those held with respect to the environment. Just this month, The Australian (acknowledged as a conservative, business-friendly paper) reported ‘sustainable development will be one of the – if not the most – critical drivers of business over the next decade as companies realise that their survival hinges on how well they respond to environmental, social and governance issues’. And, with respect to climate change, US Secretary of State, Hillary Clinton commented this month, ‘The US is fully engaged and ready to lead and determined to make up for lost time, both at home and abroad.’ The Grantham Research Institute (UK) reported in April that of the stimulus packages (US$2,610 billion) so far unveiled by the G20 countries some $400 billion (15%) has been allocated to ‘green measures’. Of note to New Zealand are the actions of trading partners such as South Korea (which is devoting 80% of its stimulus package to environmental-related initiatives over the next four years) and China (35% or US$200 billion). Progress is being made in New Zealand, especially among those operating in the export and government sectors, but the Ministry for the Environment’s briefing report to the incoming government (November 2008) highlights much still needs to be done. Business NZ has recently established a ‘major companies’ group with a focus on sustainability issues, and membership of the NZ Business Council for Sustainability, which presently represents about 37% of New Zealand’s GDP, continues to grow steadily. Landcare Research has been involved in the science to reduce the effects of business on the environment for more than a decade now. Not surprisingly, we think the environment represents a very substantial opportunity (as well as a strategic threat) for New Zealand businesses. This edition of Discovery features some of this research and the successes businesses have enjoyed from this.
As always, I welcome and value any comments you might have on any of these topics.
Warren Parker
Chief Executive